Romania's finance minister Florin Citu presented the second budget revision this year, including an 8.6%-of-GDP deficit based on updated projections of 3.8% GDP contraction, Hotnews.ro reported.

Under the first revision in April, the Finance Ministry envisaged a 6.7%-of-GDP deficit, based on hopes for a milder GDP contraction (1.9%). Before the coronavirus outbreak, assuming 4.1% GDP growth, the Government was aiming at a budget deficit of 3.7%-of-GDP.

The 5pp increase in the budget deficit, compared to the initial scenario, is mainly caused by a RON 31 bln (EUR 6.4 bln) drop in revenues, which contribute 3pp to the overall deficit expansion. Higher expenditures needed in the sectors of healthcare, social security, and investments will push up public expenditures, adding another 2pp to the deficit, according to finance minister Citu.

Despite the tight fiscal construction, the key sectors of healthcare, labor, and transport have received significantly more funds. The Health Ministry's budget was revised upward by 45%. The Labor Ministry received an extra RON 10 bln (EUR 2 bln, 1% of GDP).

The pensions will increase "more than ever," minister Citu announced - stressing that this is an outstanding performance during steep economic contraction. According to the pension law adopted by the Parliament last year, pensions should increase by 40% on September 1, but the Government has been looking for ways to phase out this increase.

editor@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)